Freight fraud is a familiar threat for shippers, carriers, and 3PLs, but as time passes and technology changes, fraud is growing more insidious and more prevalent. Between Q4 of 2022 and Q1 of 2023 alone, incidents of cargo theft increased by a massive 600%, with unlawful brokerage scams being reported as the primary concern.
A survey of industry professionals showed that fraud cost respondents more than $40,000 per load on average, and the average cost of fraud per organization was more than ten times that figure.
As the number of fraudulent activities increases, so does their sophistication. In addition to direct cargo theft, companies must now be vigilant in preventing fraud via double-booking, brokerage scams, phishing, and identity theft. According to survey results, 74% of respondents had experienced at least three types of fraud, while 64% experienced at least four. This means that carriers and 3PLs must now be more vigilant than ever, closely monitoring every step in their operations, from booking to delivery, for potential security weaknesses.
The very factors that put 3PLs in a unique position when it comes to preventing freight fraud also pose unique challenges. Carrier networks, for example, offer the opportunity to vet and monitor who exactly is moving their customers’ goods; however, the complexity of executing this kind of threat assessment grows in proportion to the size of the network. 3PLs must be exceptionally efficient and strictly follow best practices in their operations to protect their customers from the ongoing and evolving threat of freight fraud.
Best practices for onboarding and vetting
Preventing freight fraud starts even before a carrier is added into a 3PL’s network. Companies looking to be as thorough as possible in their vetting efforts should consider evaluating background checks for drivers and company info, like credit history and compliance reports, necessary steps in the pre-onboarding process.
Drivers, as the primary human element in the shipping process, should be trained on fraud prevention best practices. For instance, training drivers to verify broker calls with dispatch before accepting changes to delivery locations can help prevent cargo from being stolen or held hostage—a significant concern in the food and beverage industry, which is a leading victim of freight fraud according to CargoNet reports.
Instituting driver requirements for high-value loads can also be an effective preventative measure against fraud. Potential requirements include length of experience with the 3PL, as well as number of loads delivered and the presence of any prior cargo theft incidents.
Best practices for load tracking
Once a load is on the road, security measures only increase. Tech partnerships with companies like CargoNet can provide valuable information regarding locations with high incidents of cargo theft. This information can be used to instruct drivers in what areas are safe to travel through or park overnight, while unsafe areas are blacklisted. The most vigilant 3PLs may even build relationships with law enforcement in these areas. GPS and dual tracking assets can be used for real-time location tracking to ensure compliance with these security measures.
For high-value shipments, additional measures may be appropriate. Making video calls to drivers to confirm that all details of the shipment and route are going as planned is an excellent option for those concerned about double booking and fraudulent carriers. Depending on the cargo and the destination, high-value and/or high-risk shipments, like electronics and telecom equipment, may warrant an escort.
Cybersecurity and tech stack recommendations
Given that, aside from outright cargo theft, most modern cases of fraud originate from some kind of technology, smart cybersecurity practices are paramount. Cybersecurity begins from within. Budgeting for cybersecurity software to detect and repel spoofed numbers and phishing emails is a critical first step; after that, internal employees form the next line of defense. Internal training helps employees recognize fraudulent calls and emails, reject them, and report them.
Externally, partnerships with third-party security companies can prevent and reinforce a variety of vulnerabilities. Solutions that verify phone systems to block spoofed calls, research and vet carriers, and analyze data to uncover high-theft areas cover all parts of the delivery process.
Freight fraud is a long-standing issue that has only grown in severity in recent years, and dealing with incidents of theft and fraud isn’t just a financial drain. Investigating a single theft can significantly slow down operations and cause inefficiencies that drain revenue and productivity.
Shippers should partner with organizations that have the internal infrastructure in place to prevent fraud and theft, both through their internal resources and external partnerships. By continually investing in a smarter tech stack, more robust compliance processes, and thorough training, those partners are positioned to not only keep their shippers’ freight moving, but to keep it safe from the threat of fraud.
